Have you tried to build a low investment high-profit business? Does the money come from angel investors, bank loans, or from the profitability of your business itself?
Answering this question can help you gauge the longevity of your business.
Did you know that there are two major ways that you can fund your business?
- Fast growth, from contributions from investors.
- Slow, slow growth, funded by the bottom line profitability in the Company.
In your business, you can pick one or the other to focus on – not both!
When I worked with FITzee Foods, we had a 50/50 focus. About 50% of our financing came from investors, and 50% came from the business itself.
Without focus, you can run out of that investment money – and without money, you can’t have a business! When you run out of money, you may be faced with the hard decision to go out of business.
As The Pitch Queen, my goal was to focus on a very low investment yet highly profitable business that can have slow growth. It will set you up for long-term success!
A guest on the Success Unfiltered Podcast, Zalmi Duchman, started his business with a near million-dollar SBA loan. The company experienced explosive growth.
Then, the money ran out. Zalmi is here to share all the details with us.
Can’t Take NO for an Answer
Zalmi Duchman started his company, The Fresh Diet, from his Miami apartment. He knew that his idea could revolutionize the food industry, by selling prepared meals.
He found a similar company to acquire that would lead to amazing growth. It was already established nationwide and would help him grow quicker.
Zalmi heard NO from multiple banks and finally applied for an SBA loan. It was almost a done deal! He’d even been assured it was 95% done!
Then, while driving, he got the call. Zalmi pulled to the side of the road, to hear a devastating NO – the bank had denied his loan request.
“I couldn’t take NO for an answer,” Zalmi said. “I asked why.”
He found that the bank vice president had reviewed the files, and denied the loan because Zalmi didn’t have experience managing multiple locations.
But he did have that experience, and a well-written email caused the bank to revisit the loan – and this time, he heard a YES!
Show Me the Money!
It takes money to run a business, especially a rapidly-growing business like The Fresh Diet.
They went from $3 million in sales to $30 million in sales and continued to grow.
However, they quickly found that they needed more than one angel investor.
Zalmi was the one tasked with finding additional angel funding.
One by one, he reached out to people, and one by one, he heard NO after NO.
The NO’s got progressively more devastating as he searched. They would go deeper into the process and get closer to having a commitment, and then, he’d hear a NO again.
Zalmi was forced to concede to new management, and was retained on the board of directors – but they didn’t want his input on the direction of the company.
For a few years, Zalmi watched as the company struggled to survive.
Going Out of Business
Zalmi likens the closing of the business to running into a burning building to rescue a baby.
“You want to do everything you can to save it,” he says.
In the end, the business was over. In 2016, Zalmi purchased The Fresh Diet back and made last efforts to try to save it.
He worked on a promising deal, but at the last moment, the contract fell through. They just couldn’t get the capital that was needed to survive, and the company was losing money.
The Fresh Diet was officially over.
They closed on a Friday, and the Monday that followed was one of the worst days of Zalmi’s life. A news article came up in the Miami Herald, and there was an outcry over the closure of the business.
Zalmi only survived the pain of that closure because of the support of other entrepreneurs. They knew the struggle and the pain and were able to support him through the process.
Looking back, Zalmi knows that he would do some things differently. He learned from the pain of that, but overall, the biggest lesson is that he would have focused more on profitability.
“Eventually you’re going to lose your business,” Zalmi says. “It’s rare to see a business passed down from generation to generation.”
Without profits or capital, there is no business.
The Fresh Diet experienced explosive growth funded by bank loans and angel funding. However, the company never grew from its bottom line profits – it grew on the capital that was raised.
If you’re a business owner, how are you funding your business? Are you working on that slow, slow growth, low investment high profit business or are you experiencing that explosive growth that often comes as a result of external funding? If you’re funded by investors or capital, how can you shift your business to focus on profitability? Tell me in the comments; I’d love to hear more about how you’re focusing on profitability.